Question

ANALYZING MANAGERIAL DECISIONS: Tipping in Restaurants

In most restaurants, waiters receive a large portion of their compensation through tips from customers. Generally, the size of the tip is decided by the customer. However, many restaurants require a 15 per- cent tip for parties of eight or more. Using the concepts from this chapter, discuss (a) why the practice of tipping has emerged as a major method of com- pensating the wait staff, (b) why the customer typically decides on the amount of the tip, and (c) why restaurants require tips from large parties.